The EURUSD is the most heavily traded currency pair in all of spot Forex.
This is great, right?
No, it’s actually the EURUSD’s biggest flaw. And unless you want to get destroyed over and over again, you need to know why, and what you can do about it. We go over both here.
If you would rather watch the video I made on this topic, you may just go here instead.
There are 2 main things we need to go over.
I have a real problem with some of the nonsense I hear traders, even fairly experienced Forex traders say about why they only trade the EURUSD. Yes, there are some people who will not trade anything else (to my complete shock). Yes, I realize you may be one of them. But even if you are not, this concerns you too. I am here to save you pips, which when it comes to your bottom line, is every bit as good as making pips.
The First Dumb Thing Traders Say About Exclusively Trading The EURUSD:
“I want to get good at trading one pair first, then I’ll move on to other pairs”
“I like the way the EURUSD moves. It fits my trading style.”
Unless your trading style is consistent sadness and disappointment, and that was your goal, you may want to hear this.
My first main point of this entire blog post is….
1) Currency pairs do not have their own unique movements
You may think a particular currency pair has a certain way it moves, and right now, or in the past few sessions, it may have. You may look at other pairs and notice a very choppy or wild or unconventional movement to them.
But this is not the norm! Pairs go from moving one way, to moving a different way, and then back again ALL THE TIME. It’s basic chaos theory, and Forex trading fits right into this.
In the video I made for this blog, I talked about the first currency pair I fell in love with, GBPCAD, and it was specifically on the 30 minute chart. This thing moved like a dream — it fit right into my system so perfectly. Seeing as how backtesting doesn’t always mean success, I traded it, with real money, and was killing it.
I was officially in love.
Until it stopped moving that way. For a very long time. I gave all that money back and then some. Heart broken. The goldmine I thought I discovered was not a goldmine. It was a trap.
Take any currency pair right now on your charts and look at the past 100 candles. Now go back and look at the 100 candles before that. You can do this on any time frame.
You will notice that the movements, almost every time, are not all that similar. Every once in awhile it will be, and 200 candles worth of date is plenty long enough to trick the novice trader into thinking that pair “x” has a “particular way it moves”
Don’t get trapped. I’ll tell you how to fix this at the end.
On to the 2nd thing I hear most from Forex traders that only trade the EURUSD:
“The EURUSD is the most liquid pair. It’s clearly the best pair to trade”.
My response is two-fold
1) So what?
Forex is already the most liquid market in the world. Trading the most liquid pair of the bunch serves no advantage. This isn’t stock trading. The EURUSD, on the whole mind you, is no smoother than trading something seen as far less liquid like the NZDCHF.
It may not seem this way right this moment, but if you’re able to zoom out and look at the big picture, they’re not that far apart. SO please stop telling yourself there’s some big advantage here.
You’re no more “tuned in” to the Forex market by trading the EUR USD than you are anything else.
We’re here to make money, people.
Or the second thing I tell them….
2) This is a bad thing.
Yes, being popular, having the most liquidity, is a big negative in Forex trading. How can this be?
So if you didn’t already know this, be a regular reader of this blog, and you’ll know soon enough. In Forex, it’s not us puny traders that decide if price goes up or down. It’s the big banks and major financial institutions that do. I have a whole blog post and video on this very phenomenon, please get familiar with this — it will greatly affect everything you do in Forex from here on out, for the better.
The fact that traders have almost no control over this is actually a really really good thing.
The traders who work for these places have a very easy job, because they get to see where spot Forex traders are positioned for every currency pair out there. If the banks want to make money, all they have to do is take price the opposite way. This way, they take trader’s money, and redistribute it back into the market, thus making price go up and down.
Every once in awhile, they will reward the popular positions just a wee bit, similar to a slot machine giving you a nice payout. But that’s only to make sure you keep playing.
And boy, does that little trick work, because traders walk right up to the counter and keep making the same mistakes over and over again. This is why Forex trading can be a lot easier than anything else out there. At No Nonsense Forex, we learn how to do the polar opposite of what the crowd does.
But as a result of the fact that the EURUSD is so popular, and so liquid, this brings me to my second main point:
The EURUSD is the most fucked-with currency pair in the world.
And it’s not even close.
Instead of having your charts do the work for you, which is what most of us are hoping to accomplish, the EURUSD makes sure things make sense a lot less than they would elsewhere.
If you were a trader for one of the big banks, and there was all of this free money sitting out there, you would naturally go where the most free money existed — and that would be in the most popular currency pair.
People love the EURUSD so much, that they will ignore the fact that the banks manipulate it more than any other pair out there.
And when banks manipulate price, everything that should make sense all of a sudden doesn’t make sense. Your trading system makes no sense, news events make no sense, all of it.
Have you ever seen really great news come out for the USD, yet the EUR USD just keeps going up instead of down like it should?
Yeah, it happens a lot. It’s the banks.
Do not be one of these people who falls into these traps. Saving you pips by having you generally avoid this pair is every bit as important as making you pips elsewhere. It affects your bottom line the exact same way.
So what should you do instead? Easy.
Dive into every other major currency pair out there and trade it just like you would the EURUSD (leverage up or down depending on volatility however). You can trade the EURUSD, just make sure you trade half the lots you’d normally trade, as a general rule. You have a disadvantage when trading this pair, your lot size should reflect this.
So more specifically, have every combination of the 8 major currency pairs up on your charting software (you can skip EURCHF — I do). Find a system that is currently working for you, and copy that for each pair. If you don’t have a system you like or one that is working well, No Nonsense Forex is definitely for you, so subscribe to the RSS feed and the Youtube channel. I will go into much more detail of the “what” and the “why” later on.
From there, just find the pairs that give you a clear entry and don’t have some big news event coming up that can derail your trade. You can do this on every time frame, but you’re asking for a lot of headaches the shorter time frames you choose. If you’re looking for the best time frame to trade, I now have a blog and video for that as well.
I know I just got done telling you to stop trading, or at least trade much more seldom, the most popular currency pair on the planet. I don’t tell people what they want to hear, because that’s often the most destructive thing you can do to a person. At this point it’s up to you. You can take it from a guy who has made every mistake in the book, and learned from it, or you can just keep going through that nightmare yourself.
As always, the choice is yours.